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Topic: Mortgage Payoff Club!! (Read 707818 times)

Paying off your mortgage before FIRE is very mustachian IMO. Especially for aggressive early retirees.

If you are looking at a long retirement, potentially 60+ years you need to maximize your investment returns. A common to do this is heavy equity exposure. Unfortunately this exposes you to a larger sequence of returns risk. Having a mortgage in the early years of FIRE increases the impact of sequence of returns risk because you have a large fixed expense, the mortgage payment. You can cut discretionary expenses but it is harder to cut a mortgage payment.

For those of you who stared with larger mortgage balances, how did you stay motivated in the beginning? Our current balance is 493k so even if I pay an extra 2,000 a month I am still 10 years away from paying it off. Did you set mini goals or just put a set amount towards it every month and forget about it?

I so much identify with it. Our balance is around 395K (we just purchased home about 6 months ago), I have no motivation to make additional payments because the number just seems so large. Let alone a dent, I feel like not even scratching the surface by making any additional payments.

But at the same time, I want to see this mortgage melt away. So I have made up my mind that no matter how I feel, I'm going to make some additional payments in the range of $500- $1000 each month.

Any bonus or unexpected cash returns get divided 50-50 between investments and mortgage.

For those of you who stared with larger mortgage balances, how did you stay motivated in the beginning? [...] Did you set mini goals or just put a set amount towards it every month and forget about it?

I so much identify with it. [...]

But at the same time, I want to see this mortgage melt away. So I have made up my mind that no matter how I feel, I'm going to make some additional payments in the range of $500- $1000 each month.

Any bonus or unexpected cash returns get divided 50-50 between investments and mortgage.

Our mortgage is not as high as yours, but I still feel the same way. The other day I made an extra payment of 300 euros, but that's just so little. Unfortunately, we can't pay down an additional 1000 euros each month. But we do what we can. Any bonuses also get divided 50-50 :)

However I made a spreadsheet, which is highly motivating for me. I wrote down our leftover amount of mortgage on the 31st December of each year for the next 30 years. My goal for this year is to beat this years number by October. I'd like to beat next years number in June, etc. So I'm just making yearly goals, this way it feels do-able. Also makes me feel like I'm competing against myself, which works really well for me. This year we have a lot of renovating to do, so we can't make huge additional payments. Hopefully next year we'll be able to pay down some more.

However I made a spreadsheet, which is highly motivating for me. I wrote down our leftover amount of mortgage on the 31st December of each year for the next 30 years. My goal for this year is to beat this years number by October. I'd like to beat next years number in June, etc. So I'm just making yearly goals, this way it feels do-able. Also makes me feel like I'm competing against myself, which works really well for me. This year we have a lot of renovating to do, so we can't make huge additional payments. Hopefully next year we'll be able to pay down some more.

For those of you who stared with larger mortgage balances, how did you stay motivated in the beginning? Our current balance is 493k so even if I pay an extra 2,000 a month I am still 10 years away from paying it off. Did you set mini goals or just put a set amount towards it every month and forget about it?

I so much identify with it. Our balance is around 395K (we just purchased home about 6 months ago), I have no motivation to make additional payments because the number just seems so large. Let alone a dent, I feel like not even scratching the surface by making any additional payments.

But at the same time, I want to see this mortgage melt away. So I have made up my mind that no matter how I feel, I'm going to make some additional payments in the range of $500- $1000 each month.

Any bonus or unexpected cash returns get divided 50-50 between investments and mortgage.

We bought a new house in September 2013 and our starting mortgage balance was $435,000. We made a plan to pay it off in 5 years, stuck with it and our mortgage balance is now at $57,000 and will be paid off by September 2018. We used all the options the bank allowed us to, regular weekly payments, increased our weekly amount once a year and added top ups as frequently as we could - including bonuses, tax returns etc. Stick with it, it can be done! And even if it takes 10 years, its better than 25 years! Your future self will thank you! :-)

@frizzywhiskers that's incredible!!! Can you provide more input on how did you manage investment during this period? I'm not sure if I could pay off my mortgage in 5 years even after throwing all my spare money at it. Although, I would never do that as I'm just starting my investing life and am probably doing 70%-30% investment vs additional mortgage payment.

Paying $435000 in five years is stellar achievement in my opinion. Congrats!!!

@frizzywhiskers that's incredible!!! Can you provide more input on how did you manage investment during this period? I'm not sure if I could pay off my mortgage in 5 years even after throwing all my spare money at it. Although, I would never do that as I'm just starting my investing life and am probably doing 70%-30% investment vs additional mortgage payment.

Paying $435000 in five years is stellar achievement in my opinion. Congrats!!!

Thanks @QuillScroll , it's been a long haul but we are excited for the finish line! We waffled back and forth many times over the years but my husband ended up getting laid off this year so it just feels right to know we can afford life on one salary. We are in Canada, but investment wise we both maxed out our work pensions during this time to achieve full company match as well as contributed an additional 15% into RRSP's. We were investing/paying down mortgage with 70% of our income and living off the 30%. Once the mortgage is fully paid off that full 70% will go into investments for a few years and we should be able to FIRE in 2021.

For those of you who stared with larger mortgage balances, how did you stay motivated in the beginning? [...] Did you set mini goals or just put a set amount towards it every month and forget about it?

I so much identify with it. [...]

But at the same time, I want to see this mortgage melt away. So I have made up my mind that no matter how I feel, I'm going to make some additional payments in the range of $500- $1000 each month.

Any bonus or unexpected cash returns get divided 50-50 between investments and mortgage.

Our mortgage is not as high as yours, but I still feel the same way. The other day I made an extra payment of 300 euros, but that's just so little. Unfortunately, we can't pay down an additional 1000 euros each month. But we do what we can. Any bonuses also get divided 50-50 :)

However I made a spreadsheet, which is highly motivating for me. I wrote down our leftover amount of mortgage on the 31st December of each year for the next 30 years. My goal for this year is to beat this years number by October. I'd like to beat next years number in June, etc. So I'm just making yearly goals, this way it feels do-able. Also makes me feel like I'm competing against myself, which works really well for me. This year we have a lot of renovating to do, so we can't make huge additional payments. Hopefully next year we'll be able to pay down some more.

I love this idea! I would find this highly motivating too and I am definitely making a spreadsheet tonight. I just made an extra $3,000 payment on my mortgage today but since the balance is $491k it still feels like a very small change. If I had a yearly goal to meet I think these payments would be a lot more motivating.

The way I looked at it when my mortgage principal was high was to think in terms of how many extra months of principal payments I had just made. For back of the envelope calculation I reduced the number of months remaining on my mortgage by the extra principal I was paying.

The way I looked at it when my mortgage principal was high was to think in terms of how many extra months of principal payments I had just made. For back of the envelope calculation I reduced the number of months remaining on my mortgage by the extra principal I was paying.

I knew this was not totally accurate because the amount of principal paid increases every month but it was enough to get me motivated to make those extra payments.

Love this Threshkin! I also did that. Another thing that motivated me was seeing the monthly interest amount drop. Sometimes it was a really small number -- but it seemed special somehow, because that was real, hard money that I got to keep this month.

FYI, if you forgot some of the math surrounding calculating these payments, go to http://wolframalpha.com and their mortgage tool (under "Finance") will show you the annual amortization table, so you can quickly see how far ahead you are on your mortgage, time-wise.

I have been partial to this excel mortgage calculator that I found over ten years ago and have used for several refinances to track original loan amount, interest rate, and the effect of extra payments I made along the way (or planned to make for modeling purposes). To keep me motivated (and our last loan started around $443k) was to focus on the total amount of interest saved over the life of the loan and also the number of years to pay off. We refinanced to a 15 year loan, planned to pay it off in ten, but now are aiming for just under 8 years. Watching the monthly interest paid go down over time has been motivating as someone mentioned above. It started over $1k a month, and now is under $400 a month. PLUS, since we won't be deducting this interest from federal taxes now - I'm really glad it's more than half of what it once was.

Also, modeling the what if I throw xxx$ at the loan now? (using the extra payments column) How much will I save in interest overall if I do that is quite fun. Most calculators only allow you to put in limited inputs that remain static over the life of the loan, but I can change the monthly 'extra payments' for each and every month if I so choose to match perhaps growing income, anticipated bonuses, or other fluctuations to see what that looks like.

I have been partial to this excel mortgage calculator that I found over ten years ago and have used for several refinances to track original loan amount, interest rate, and the effect of extra payments I made along the way (or planned to make for modeling purposes). [...]

Also, modeling the what if I throw xxx$ at the loan now? (using the extra payments column) How much will I save in interest overall if I do that is quite fun. Most calculators only allow you to put in limited inputs that remain static over the life of the loan, but I can change the monthly 'extra payments' for each and every month if I so choose to match perhaps growing income, anticipated bonuses, or other fluctuations to see what that looks like.

Oh yes, how could I forget this! I also do this, such fun. If I can pay an extra 3000 this year, what does it do? Hours of fun are to be had with this tool :PI used this one btw: https://www.daveramsey.com/mortgage-payoff-calculator But i'm gonna check yours out as well.

We paid off our mortgage a few months early last Tuesday. We did that as my wife has 'pre-tired' and her income has halved so it is a debit we didn't need coming out of our account on the 1st of each month. Also, although the interest is very low, the mortgage protection is a lot higher and we are saving that. It was, in fairness, a small enough amount left to pay. Just wanted to tell someone. It's a bit anticlimactic and, this week, our beloved cat died, the fridge freezer packed in same day and a rad in the rental house has been leaking(unknown to us) for 2 months and those are all extra expenses this week! I miss the cat. All else is just stuff! IT

We paid off our mortgage a few months early last Tuesday. We did that as my wife has 'pre-tired' and her income has halved so it is a debit we didn't need coming out of our account on the 1st of each month. Also, although the interest is very low, the mortgage protection is a lot higher and we are saving that. It was, in fairness, a small enough amount left to pay. Just wanted to tell someone. It's a bit anticlimactic and, this week, our beloved cat died, the fridge freezer packed in same day and a rad in the rental house has been leaking(unknown to us) for 2 months and those are all extra expenses this week! I miss the cat. All else is just stuff! IT

We paid off our mortgage a few months early last Tuesday. We did that as my wife has 'pre-tired' and her income has halved so it is a debit we didn't need coming out of our account on the 1st of each month. Also, although the interest is very low, the mortgage protection is a lot higher and we are saving that. It was, in fairness, a small enough amount left to pay. Just wanted to tell someone. It's a bit anticlimactic and, this week, our beloved cat died, the fridge freezer packed in same day and a rad in the rental house has been leaking(unknown to us) for 2 months and those are all extra expenses this week! I miss the cat. All else is just stuff! IT

Our balance is at $48,300. I just looked at our liquid assets and we could write a check and pay it off, but it would mean selling some stocks and taking short term gains, which I'm not sure of. I will discuss it with my spouse and we'll see. If we go slow, it could take 3 - 5 years, if we go fast, we could pay it off at the end of this year. I will probably wait for some of the short term cap gains to age into long term cap gains and if we go for it it would be more toward the end of the year.

I don't think it's fair to describe their motivations in that way on a thread they've been told not to post on.

I think of this like a weight loss forum where a group of people decided to walk for 15 minutes every day, and other folks kept on pointing out that running would burn more calories. Or the ongoing argument about those who go for a snowball debt repayment vs. the mathematically proper 'highest interest rate first'. Mathematically one is better the majority of the time. But maybe doing the other way helps create great habits and pretty good outcomes.

I love that we have a bunch of people here who are aiming for a financial goal that excites them and that they have a lot of control over. Let's focus on that.

@plainjane, Love the walking vs running analogy... The life change in behavior is more likely by walking... even for those who say they “love” running.

@KBecks, We are mulling the same sort of decision at the low-40s level FWIW... Basically taking the approach that all cash on hand (minus 6 month emergency fund) plus any new income “chunks” go to debt payoff given the age of the bull market and interest rate upward pressure versus equities)... Perhaps a Dave Ramsey moment will help in the mental calculus... Would you borrow money today to put in the market if your house were paid off? In 2009, such risk usually made sense for depressed real estate purchase (if a bank would even lend)... but today, seems not so much. Best of luck either way!

I was able to pay an extra $7,000 towards the mortgage this month! We still owe 486k so i’ve set a goal of paying an extra 50k towards the mortgage each year to keep myself motivated. Even that seems like it will take forever but we have only owned the house for 1 year so if we can pay it off in 10 years I will be happy.

For those of you who stared with larger mortgage balances, how did you stay motivated in the beginning? Our current balance is 493k so even if I pay an extra 2,000 a month I am still 10 years away from paying it off. Did you set mini goals or just put a set amount towards it every month and forget about it?

I calculated the extra amount we'd have to pay every month to cut the mortgage in half. You can do this by doubling the principal payment each month, but that way the extra payments start off tiny and end up huge. We wanted consistent payments, which would eventually feel smaller over time due to increased salaries.

We set up our auto payments to include this fixed extra amount, and it's been hands-off since.

Well, kind of hands off. I also spent a bunch of my free time writing increasingly sophisticated mortgage calculators, and I still use them to compare what-if scenarios.

One mental hack early on in the mortgage is to pretend that each extra multiple of the current principal payment knocks off that many months from the end of the mortgage. This is a fun game to play early on because the principal payment is lowest at the beginning. It's awesome to be able to say "I just paid $1,500 extra on my $2,350 P&I mortgage and knocked 2 months off the end of it!"

For those of you who stared with larger mortgage balances, how did you stay motivated in the beginning? Our current balance is 493k so even if I pay an extra 2,000 a month I am still 10 years away from paying it off. Did you set mini goals or just put a set amount towards it every month and forget about it?

I calculated the extra amount we'd have to pay every month to cut the mortgage in half. You can do this by doubling the principal payment each month, but that way the extra payments start off tiny and end up huge. We wanted consistent payments, which would eventually feel smaller over time due to increased salaries.

We set up our auto payments to include this fixed extra amount, and it's been hands-off since.

Well, kind of hands off. I also spent a bunch of my free time writing increasingly sophisticated mortgage calculators, and I still use them to compare what-if scenarios.

One mental hack early on in the mortgage is to pretend that each extra multiple of the current principal payment knocks off that many months from the end of the mortgage. This is a fun game to play early on because the principal payment is lowest at the beginning. It's awesome to be able to say "I just paid $1,500 extra on my $2,350 P&I mortgage and knocked 2 months off the end of it!"

I like this idea! I am working on a spreadsheet that will tell me how many months of payments I have left. It will be exciting to see how many months it decreases by with each payment. I just paid an extra 5k towards the mortgage and calculated that it took an extra 3 months off the end of my mortgage!

Congratulations everyone! I only have $40k left on my mortgage (just under 9 years in), but I took myself out of the prepay game after prepaying a few chunks several years ago, in order to focus on real estate investing, which requires a lot of capital. After I get my second property (hopefully by end of next year), I'll go back to paying it off. It's very tempting to just pay it off in a year, but I'll be patient just a while longer and in the meantime live vicariously through this thread.

To put everything in context, I live in Canada, where 5 year term mortgages with a 25 year amortization to start was the default - these are also known as balloon mortgages in the US. We put down 25% to avoid mortgage insurance, plus 5k because the lender was concerned we had overpaid. Our first mortgage was 5 year fixed (5.25%) on a 25 year amortization, and our second mortgage was a 5 year variable (tended to be around 2.25%) with maybe a 10 year amortization (perhaps 15?).

TLDR: we bought the house with a mortgage payment that we knew we could carry with our existing lifestyle: it was what we'd been paying in rent + amount we'd been saving for the downpayment. We ended up with better cash flow because of raises, and then had some helpful bonuses in the 10-20k range, most of which got redirected to the house instead of lifestyle inflation. I had internalized the script about paying down the mortgage from my parents who did that in the 80s, and at some point I decided I didn't want to have a mortgage when I was 40.

The long story:To start out, all we did was to pay our mortgage biweekly because we received pay checks biweekly. So 26 payments a year instead of 24. We were also paying back the 40k we had borrowed from RRSPs quite aggressively. I am pretty sure we paid back ourselves before we started prepaying the mortgage beyond the biweekly payments.

IIRC that mortgage provider allowed for a single lump sum payment every year, so after we paid back the RSP Homebuyer's withdrawal, we would send them my bonus or the tax refund as a physical cheque, and eventually through a phone call. We were also putting in the maximum of my annual RSP room for retirement investing, but not the SO's (because they are at a lower marginal tax bracket, so I'd do a spousal contribution). My documentation is on another computer, but think in the range of 5k-15k a year.

After 5 years of kicking ourselves for having a 5%+ fixed rate mortgage when everyone else was seeing interest rates drop like a stone after 2008, we got a 5 year variable mortgage after the first term was done and dropped down the amortization to 10 or 15 years (which was basically the same base payment thanks to the lower interest rate). This one was with a much more modern institution, and we could make lump sum payments or increase the amount of our payment really easily online. My pay switched to semi-monthly around then, so we changed our payments to semi-monthly too, but at a higher amount, so we didn't lose the advantage of that 'extra month' payment that we had been doing. I think the rule was that we could prepay up to 25% annually and/or increase the amount of the regular payments by 25%.

Because it was so easy to do online, we did a mix of big lump sum payments (tax refunds, bonuses, skimming off the top of emergency funds when it felt like we were carrying too much cash), and smaller 200-500 passes when we had more money in our chequing account than needed to cover that month's bills. By that time we were maxxed out on the tax advantaged investments, and putting money into the mortgage was a delay tactic to figuring out what to do with the excess cash.

Now that we don't have mortgage payments, the lower earner puts that cash into non-registered investments. Looking back, we could have made a number of better decisions, but they were the decisions we made at the time, and we didn't end up in a bad place.

@plainjane, I share that “kicking myself” feeling... It’s our current smarter self realizing how dumb our past self was. If everyone were smart, you wouldnt be winning now with a paid off house and wealth accumulation. The economy thrives on consumption but FIRE comes from your focus on accumulation.

OK, a small but good dilemma... The bonus has come in and we can pay off the house with it +20K from the stache... But we are also putting the house on the market to downsize this month... AT LAST! Do we pay to simplify closing and to mainly finish the journey (saves a few $100s in interest) or just sit... We have plenty in the stache to cover earnest money and moving either way... and will pay cash for the smaller place.

Pro’s and Con’s of paying the note? Even interested in how this plays in realestate transactions in other countries?

I would just hang on to the money. We paid our house off one year ago today (yay us!) and it took about 6-8 weeks for everything to be processed with the lender as far as getting the note back marked paid and the lien released with the county. If your place were to go under contract quickly, you could end up causing more headache and confusion by having the payoff piece in process, than to just let it ride and go through the normal sales process cycle. Just my two cents.

Today we celebrate one year since we wired the proceeds to payoff our house. We have no regrets about our decision and love knowing that even a sudden long-term job loss would not put us at risk of losing our house. There’s something cool about knowing we fully own every little bit of flooring, sheetrock, granite, roofing, etc. in this structure we call home.

Today we celebrate one year since we wired the proceeds to payoff our house. We have no regrets about our decision and love knowing that even a sudden long-term job loss would not put us at risk of losing our house. There’s something cool about knowing we fully own every little bit of flooring, sheetrock, granite, roofing, etc. in this structure we call home.

I love this! This is exactly how I feel. I know we could make more money in the market but knowing we have zero debt and everything we own is 100% ours is worth it to me. Our mortgage makes up a large percentage of our expenses as well so a drastic decrease in our expenses prior to our children going to colllege is also appealing.

@iluvsbeach, Congrats on paying yours off! And great point about the closing drama I might cause. After 3+ yrs of testifying on this board, saving and encouraging to get to this point and the emotional desire to just be done, I’m going to be pragmatic and save the bonus and call the mortgage payoff goal met as soon as we sign at the closing table.

Still gonna be nice to get 90+% of the proceeds back in that check. The last paid-off house we sold, 2 bankers came out of their offices when I deposited it to sell me financial products and so called “Premium Banking” (with “premium fees” that come with such financial garbage).

Yoo-hoo, one mortgage paid off. 120k in just over 6 years! Only downside is that we opened a second mortgage to fund some improvements (changing the boiler for an electronic geyser, replacing the central heating with a heatpump). On the plus side the new mortgage is at 1.65 percent with only one year fixed. Target payoff date is end 2019, this way I don't have to withdraw from my investments.

We are 3 years into a 25 year term, started at £130,050 after a large deposit, and now down to £115,000. A long way to go, but once we get that number into the five figure club, oh baby...

I could go harder at the overpayments but I am putting in a fair amount into investments. We have our first child who will be born imminently, which will definitely pause the overpayments as my wife will be off work for a year!

So far for the month of June we have managed to put an extra 7k towards the mortgage. My first post in this thread was April 3rd of this year and my mortgage balance was $497k. Today it is $477k so we have paid of 20k in 3 months. My goal by the end of the 2018 is to be at 440k. My oldest child will start college in 2027 so my original goal was to pay it off by then but I think we will beat that goal by a few years.

Interest rates ticked up another .25%. I am bummed because I may be in the getting a mortgage club again soon. My current mortgage is at 2.625%. I'm not looking forward to higher rates. I guess it would make the payoff decision easier.